Darling to make child poverty his priority

Alistair Darling will today seek to defuse criticism of the government's likely failure to meet its 2010 target for halving child poverty, by offering the bulk of his limited budget leeway to tackle deprivation.

While the poor state of the government's finances means the chancellor can offer only a fraction of the £3.4bn needed to meet one of Gordon Brown's main promises, he will stress that today's downpayment is a sign of the government's determination to meet its pledge.

Tony Blair and Brown originally promised nearly 10 years ago to abolish child poverty by 2020. But ministers now accept that it will be almost impossible to hit even the interim 2010 milestone of halving child poverty. Despite pumping billions of pounds into tax credits, the government is still some way off coming up with the additional funds required.

Ministers define the child poverty target as ensuring no children live in a household earning less than 60% of national mean income, before housing costs.

But ministers are struggling with tight finances and there is limited room for manoeuvre for Darling. This may be made worse by the decision yesterday to delay a 2p increase in fuel duty until the autumn, which will cost £500m in lost revenues.

The poverty lobby increased the pressure yesterday with the head of policy at One Parent Families, Kate Bell, saying: "We need evidence in budget 2008 that there will be no turning back on the promise to halve child poverty by 2010. This may be a tough spending round for government, but it's even tougher for the 1.5 million poor children living in one-parent families struggling to make ends meet."

Welfare experts have estimated the government needs to spend £3.4bn more on tax credits and benefits to reach the 2010-11 target.

Ministers have been looking at each claimant group to see what needs to be done to reach the target. The bulk of the extra money to be announced today is likely to go to impoverished people with disabilities and pensioners, with lobbyists pressing for special help for families with disabled children.

One minister said last night that the government was skewing a lot of the money towards people with disabilities. One in three of working-age disabled adults and their families live in poverty, because 50% of them are not in jobs and the levels of benefits are simply too low.

In a sign that ministers plan to go on the offensive against the Tories, the work and welfare secretary, James Purnell, will lead the budget debate in the Commons tomorrow. He will challenge the Conservatives to make clear whether they support the child poverty target or merely see it as an aspiration. More than 80 backbench Labour MPs, including the former work and pensions secretary David Blunkett, have pressed the government to retain its commitment to the target.

The Child Poverty Action Group claimed there was mounting public support for extra effort to address inequality.

It is expected that either in the budget today or over the next two weeks the Department of Work and Pensions will announce it has reached agreement with the Treasury to allow it to keep some of the savings it secures from helping into work those on incapacity benefit. At present all the savings go to the Treasury.

Without retaining any of the savings, the DWP would have difficulty providing financial incentives to the new generation of private job placement contractors.

For each £1m the DWP spends on enabling people to return to work or take up employment through the access to work programme, the Treasury gains £1.7m.

In a sign of tensions over the issue on Labour backbenches, the Labour chairman of the work and pensions select committee, Terry Rooney, yesterday warned of insurrection unless ministers provide generous increase in payment for those currently on incapacity benefit but due in October to be put on a new employment support allowance if they are deemed to being incapable of work in the long term.